Tuned In to China’s TV Future

John Sie believes he is taking the high road to China. The movie version of “The Last of the Mohicans” is more than a rousing historical romp--it tells the story of the Native American struggle for freedom from tyranny. The four-hankie “Steel Magnolias” promotes family values and strong women.

“This is the best way to educate the Chinese people about freedom and human rights,” said Sie, founder and chairman of Starz Encore Group and the only American allowed to air a nightly block of Western programs and movies on China Central Television, which reaches from the mountains of Tibet to Shanghai’s Pudong financial district. “Our exports go far beyond an economic enterprise.”

That, of course, is what the Chinese government fears most: losing control of its 1 billion television viewers once they are exposed to foreign influences. It also is why the nearly invisible partnership Sie quietly has forged with the powerful state-owned CCTV--giving him a front-row seat to the Communist Party’s struggle with the outside world--is so remarkable.

News Corp. and AOL Time Warner Inc. recently made headlines as they angled for permission to broadcast Chinese-language entertainment programs to southern China. In exchange, the two media giants said they are considering airing Chinese programs in the U.S.

But for five years, Sie’s Encore International Inc. has been providing American movies, variety shows and TV dramas such as “The Pretender,” its most popular show, to a prime-time Chinese audience. It also has brought CCTV’s Chinese-language dramas and news shows to American cable viewers. In February, this pioneering venture was renewed for five more years.

Though his competitors are closing in, Sie, whose Starz Encore Group is the largest provider of cable and satellite-delivered premium movie channels in the U.S., hopes his firm will be the first Western company licensed to operate a nationwide cable channel in China.

“Right now we are treading water until we can get the floodgates open.” said the 65-year-old Chinese American cable pioneer.

Encore Could Enjoy Advantages of WTO

In a twist that highlights the global media consolidation, Sie could be a winner even if he loses his bid. Sie’s Englewood, Colo.-based companies--Encore International, Starz Media Group and the International Channel--are subsidiaries of John Malone’s Liberty Media Corp. Liberty also is a leading shareholder in News Corp. and AOL Time Warner. “I think the market is big enough for everyone,” Sie said diplomatically.

Sie is hardly a household name on either side of the Pacific, but underestimating him could be dangerous, because his Chinese admirers have clout. When NATO forces bombed the Chinese Embassy in Belgrade in 1999, Chinese officials pulled all Western television programming off the air except Jiayi, Encore’s branded block of programs.

“I believe Encore will be the very first to enjoy the advantage of China’s participation in the WTO [World Trade Organization],” Zhao Yu Hui, CCTV’s director of international operations, said recently. “Encore is the only one and the very first one who cooperated with CCTV within China. The Chinese people will never forget our old friends.”

China has a strong allure for Western media companies because of the promise of steep growth. With 250 million viewing households--CCTV estimates nearly 1 billion people tuned in to July’s live coverage of Beijing’s successful Olympics bid--China already represents the world’s largest untapped market. Television advertising revenue, almost nonexistent a decade ago, nearly reached $2 billion last year, of which CCTV collected $645 million.

China’s top leaders have kept a tight grip on the media, particularly television, fearing their airwaves will be flooded with subversive Western ideas controlled by foreign interests. But commercial pressures are forcing a massive overhaul of the country’s fragmented marketplace, which includes CCTV, 32 provincial broadcasters and several thousand locally owned cable stations.

Foreign broadcasters--officially restricted to five-star hotels and foreign government compounds--already have moved into southern China by beaming their programs across the border from Hong Kong. The Internet also has opened a path for restricted material.

Media experts predict China’s membership in the World Trade Organization, expected early next year, will widen the road. Foreigners still will be banned from ownership of television stations but will be allowed to own as much as 49% of a telecom provider. Content can be streamed over the Internet, so China has reconsidered foreign restrictions in other arenas.

Stepped-up competition and reduced government support are forcing CCTV, long viewed as China’s premier propaganda voice, to seek foreigners with the expertise to compete for advertising revenue, said Craig Watts, an analyst with BDA (China) Ltd., a Beijing-based telecom/media consulting group. “Advertising dollars are going to flow to the places where the viewers are,” he said. “The viewers aren’t going to watch a dusty speech by Jiang Zemin.”

A pioneering role in China’s television industry wasn’t on the radar screen of the “very Americanized” Sie. Forced to flee the mainland with his family after the Communist takeover in 1949, he built a new life in the United States. Armed with an electrical engineering degree, he worked in defense research before moving to cable television. Sie worked at Showtime before following Malone to Tele-Communications Inc. in 1984, where he helped launch the Starz and Encore themed pay-TV channels. TCI was acquired by AT&T; Corp. in 1999. This year, Liberty Media was spun off from AT&T.;

It was Sie’s strong-willed daughter, Michelle Sie Whitten, who led him to confront his aversion of things Chinese. Fascinated by the family history that was taboo during her childhood, she enrolled in Peking University in 1987. When her father came to check up on her, he became intrigued with China’s free-market revolution and eventually persuaded his daughter to ditch academia to work for him. As president of Encore International, she oversees the firm’s many China projects, including a joint-venture advertising firm; publication of MediaView, a Chinese-language industry magazine; and production of an annual cable television conference in China.

Jiayi Still a Money-Losing Venture

There were other foreigners knocking on CCTV’s door. But Sie was one of a handful of prominent Asian American television executives, and he quickly gained the trust of Yang Weiguang, CCTV’s globally ambitious chief executive.

At Sie’s urging, Yang expanded CCTV’s empire from three channels to eight, adding special-interest drama and entertainment channels that someday could be the backbone of a premium pay-television cable service. The Chinese executives also were encouraged to move to digital, which would position them for the next generation of programming.

Sie offered to provide CCTV-8, the drama channel, a nightly hour of Jiayi programming free, in exchange for a share of the advertising revenue. It was a risky move--China’s advertising rates are among the lowest in the world. A 30-second slot at the beginning of the Jiayi program is $1,445, rising to $1,800 in the final moments. A similar chunk of time costs $500,000 on CBS’ “Survivor” or $400,000 on NBC’s “ER.”

With annual advertising revenue of about $25 million, Jiayi still is a money-losing venture.

“What you’re looking at is a ridiculous start-up cost and nowhere to go but up,” said Whitten, who pointed out that Jiayi’s advertising revenue has increased more than 100% since 1998. “As CCTV grows, we grow too.”

A Willingness to Play by the Rules

To clinch the deal, Sie also agreed to air CCTV’s Chinese-language dramas on his multilingual International Channel, which reaches 10 million U.S. households, and to broadcast CCTV-4, a 24-hour international channel, on IC’s digital platform. He also cut a deal so CCTV could air some of its most newsworthy events, such as Deng Xiaoping’s funeral, on CSPAN. That gave the Chinese something much more valuable than advertising revenue: unedited access to the White House, Congress and other places of influence.

“John had a Chinese heritage and a sincere desire to help his motherland,” said Xu Xiongxiong, a retired CCTV executive who works in Encore’s Beijing office.

A critical part of Sie’s success has been his willingness to play by CCTV’s rules, which meant submitting the Jiayi lineup to a grueling censorship process. Programs initially are reviewed by an Encore staffer in Denver and in Beijing. If their viewpoints differ, a third person will weigh in. To fill 500 hours of television a year, Encore’s staff must sift through at least 1,000 hours of programming.

The most frustrating issue for Encore is the lack of written guidelines, which leaves everything to the discretion of Chinese censors. At CCTV-8, which dubs the programs in Chinese, those duties rotate among senior executives, producers and directors who have their own quirks. “Someone may reject a movie just because he doesn’t like the actors,” said Mai Arnold, the Encore vice president in charge of program acquisition.

Explicit sex, promiscuity and excessive violence are prohibited, which means no “Sex in the City” or “Friends.” But the lines between right and wrong, acceptable or not, are deliberately vague and constantly changing. CCTV’s censors have grown more accepting of crimes of passion or adultery as long as the characters correct their behavior or are punished, Arnold said. “It has to have a positive resolution. You can’t just say having affairs is a great thing.”

Comedy is tricky because it is so heavily influenced by culture. Arnold thought the TV comedy series “Everybody Loves Raymond” would be a sure winner, but it didn’t get any laughs. In a country with deep-rooted notions of familial responsibility, Raymond’s dysfunctional extended household apparently didn’t seem believable. “Comedy is really difficult to translate,” Arnold said.

Politics remains the most dangerous arena because the bad guys keep changing. Programs dealing with Tibet or Taiwan or plots that glorify the West or vilify an ally are clearly off-limits. Li Hong, the primary Beijing reviewer, gave a thumbs down to the Civil War drama “The Perfect Tribute” because she thought it “glorifies Americanization.” At the last minute, CCTV censors nixed an Australian detective show that portrayed Thailand’s government as corrupt.

Programs featuring spirituality, religion or the supernatural have been taboo since the Chinese government declared war on the Falun Gong spiritual sect. “When Peggy Sue Got Married,” a Hollywood comedy about a romance caught in a time warp, sailed through. But the film version of Isabelle Allende novel “The House of the Spirits” was pulled out of the Jiayi lineup because the mystical tale was, well, too mystical.

After the NATO bombing, Encore decided to reduce the likelihood of getting caught in the inevitable tensions between China and the West. Next month, Jiayi will move to an all-movie format that will focus on international fare, including dramas from South Korea and other Asian countries.

Sie chafes under these restrictions. But he points out how much more freedom the Chinese people enjoy today--in where they live and work, what they watch on television, who they criticize--than when he first visited Beijing. One of CCTV’s most popular television programs is an investigative news show that highlights corruption and other government misdeeds.

“There is a big wall here and within that wall you’re OK as long as you know where the cliff is,” he said of China. “Hopefully, as personal freedoms grow, you move the cliff. . . . You can’t create America overnight.”